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Inside Washington (06/02/2011)

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* WASHINGTON (6/3/11)--An uneven regulatory environment is a primary factor behind the current credit crunch, witnesses told lawmakers at a House Small Business Committee hearing Wednesday. Federal Deposit Insurance Corp. regulators inconsistently apply regulations, Lynn Ozer, the executive vice president of Susquehanna Bank, Pottstown, Pa., told the committee (American Banker June 2). Ozer was testifying on behalf of the National Association of Government Guaranteed Lenders. William Hall, a member of the board of the International Franchise Association, said franchises are also having difficulty obtaining loans because of inconsistency by regulators. Rep. Allen West (R-Fla.) said that President Barack Obama assured Republicans in a meeting at the White House Wednesday morning that the federal government doesn’t have any effect on the ability of banks to lend … * WASHINGTON (6/3/11)--The Treasury Department has warned Small Business Lending Fund (SBLF) applicants that they will not qualify for funding if regulators have restricted them from paying dividends (American Banker June 2). Treasury sent questionnaires to all C corporation banks requesting whether can pay dividends on SBLF securities and, if not, whether they are working with their regulators to remove those restrictions. Dividend restrictions must be removed or waived by Aug. 1 for banks to qualify for the program. The notice is a reaction to pressure from lawmakers for greater oversight of the program, according to lawyers for applicants. Only healthy banks can qualify for the SBLF program, and the Treasury is required to confer with each applicant’s primary regulator before approving its application. Banks with dividend restrictions typically are limited by a regulatory order …

Cheney in op-ed Congress must pass interchange delay before its too late

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WASHINGTON (6/3/11)—With regulations that would set a cap on interchange fees charged during debit transactions set to come into effect in late July, Congress must, at the very least, recognize the severity of the situation for credit unions and their members and take another look "before it's too late,” argues Credit Union National Association (CUNA) President/CEO Bill Cheney in an op-ed being distributed to more than 400 news outlets across the country. The Federal Reserve Board's proposed interchange regulations could limit debit card transaction fees to as little as seven to 12 cents per transaction. A proposed exemption for issuers with under $10 billion in assets is included in the proposal, but CUNA, leagues and credit unions have been emphasizing that the exemption is flawed and will not work in practice. The interchange fee reduction would result in a $15 billion-plus windfall for merchants, Cheney noted, “with no evidence, and no requirement, that they pass their gain back to their customers.” Cheney explained in the op-ed that the “highly advanced and consumer-friendly” debit card network costs money to operate and, until recently, the merchants who used the system paid for it, usually at about 1% to 2% per transaction. Cheney's op-ed is being carried by a number of papers around the country that subscribe to the McClatchy-Tribune News Service. The existing fee structure has spurred the creation of an enormous variety of free payment cards from credit unions, community banks and major institutions, Cheney noted. But under the fee cap statute slipped into last year's Wall Street reform legislation by giant retailers, Cheney said, the $15-billion windfall for merchants is going to have to be made up by credit unions and others that issue debit cards. “For the big banks that may mean that customers pay more, get fewer services and/or shareholders make less profit. And even with their enormous resources, in some cases they have already raised their fees to address the reduced revenue. “In a credit union, however, it's all about the consumer-member--who is also the owner. As not-for-profit institutions, extra revenue gets channeled back to the credit unions' membership as higher savings yields, lower loan rates and lower fees. Last year, these savings to credit union members amounted to more than $6.5 billion,” Cheney said. Noting that the interchange provisions were added to the Dodd-Frank Wall Street Reform Act “with no serious review and very little debate,” Cheney said that “any regulation directly affecting so many Americans should have received proper study before it was passed.” House and Senate legislation that would delay interchange cap implementation and require a study of the cap’s impact on consumers, financial institutions, and merchants remain active in Congress. Merchants are fighting to maintain the status quo and let the interchange cap go forward, and a merchant op-ed appeared opposite Cheney’s editorial in the McClatchy-Tribune News Service on Thursday. CUNA and credit unions continue to fight for an interchange delay, and Cheney recently called on credit unions and their supporters to continue to press their local legislators for a delay. (For prior coverage of this push, use the resource link) Capitol Hill-based publication Roll Call reported that the next front in this debit interchange fight may be state legislatures, where pro-retailer groups are promoting legislation that would allow merchants to select which card providers they would work with based on fee structures. For the CUNA editorial and Roll Call’s recent coverage, use the resource links.

NCUA issues prohibition order to former CU CEO

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ALEXANDRIA, Va. (6/3/11)—The National Credit Union Administration (NCUA) on Thursday prohibited Stan Roberson, a former employee of Denver, Colo.-based Her Majesty’s CU, from future work at any federally insured financial institution. Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Roberson, the former CEO of the credit union, was convicted of contempt of court and sentenced to 180 days in jail. Late last year, Roberson was sentenced to one year in jail for contempt of court and failing to produce documents for a securities investigation by the Colorado Division of Financial Services. Regulators have investigated the credit union in an attempt to determine whether it is legitimate or a fraud. The investigation was spawned by the credit union’s offering of certificates of deposit to consumers over the internet at interest rates above prevailing rates. Roberson also made several inconsistent statements during a discussion with the Credit Union Association of Colorado last year. The then-CEO claimed to be in charge of the only Virgin Islands-based credit union, and claimed that his credit union was a member of both the Credit Union Association of New York and the Credit Union National Association. The statements were false. The credit union is still in operation, is chartered in the U.S. Virgin Islands, and maintains a back office operation in Denver, Colo. However, the credit union is not chartered by the Colorado Division of Financial Services nor the NCUA. For the full release, use the resource link.

30- 15-year rates continue to set yearly lows

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WASHINGTON (6/3/11)--Thirty- and 15-year fixed-rate mortgages slid even further during the week ended June 2, again setting new yearly low points, with 30-year loans averaging 4.55% and 15-year loans averaging 3.74%. The previous lows for this year were set last week. Freddie Mac Vice President/Chief Economist Frank Nothaft said that the fixed mortgage rate reductions related to lower weekly U.S. Treasury yields, which dropped “amid financial market concerns that the current lull in the economy is continuing.” The housing market also remains slow, he added. Five-year adjustable rate mortgages (ARM) held steady during the week, again averaging 3.41%. One-year ARMs increased slightly, totaling 3.13%. Five-year ARMs averaged 3.94% this time last year, while one-year ARMs averaged 3.95%.